March 30 (Bloomberg) -- U.S. House Republicans drew a bright line in the election-year battle over government debt, passing a budget calling for more than $5 trillion in spending cuts.
Lawmakers yesterday approved 228-191 a $3.5 trillion plan to overhaul Medicare, slash food stamps, Pell grants and other programs for the poor, boost defense spending and reduce taxes on high earners. No Democrats voted for Ryan’s plan; 10 Republicans opposed it.
The proposal is doomed in the Senate, where majority Democrats say it would take too much from lower-income Americans while giving tax breaks to the wealthy. Senate Democrats have said they don’t plan to pass a budget this year.
The debate will continue through the November election as lawmakers battle over contrasting visions of what to do about the government’s $1.2 trillion deficit.
“We are offering the nation a choice,” said House Budget Committee Chairman Paul Ryan, a Wisconsin Republican and the plan’s chief architect. “We think America is on the wrong track. We believe the president is bringing us towards a debt crisis and a welfare state in decline.”
Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget panel, said, “Apparently the problem is not big enough to ask folks at the very high end of the income scale to contribute one penny towards deficit reduction.”
Money From Millionaires
“Because our Republican colleagues refuse to ask millionaires to contribute one cent to deficit reduction, they hit everyone and everything else,” Van Hollen said.
Republican presidential candidate Mitt Romney called it a “bold budget that directly addresses the drivers of our nation’s spending crisis,” praising House Republicans for putting “conservative fiscal principles into action.”
The plan is “grasping onto the same failed economic policies that stacked the deck against the middle class,” White House spokesman Jay Carney said in a statement.
Ryan endorsed Romney for the Republican nomination in an interview today on Fox News Channel, saying the former Massachusetts governor “understands exactly what we need to do stop America from having a debt crisis.”
“Mitt Romney has the skills, the tenacity, the principles, the courage and the integrity to do what it takes to get America back on track,” Ryan said.
Lawmakers rejected several competing plans, including a bipartisan budget proposal based on the recommendations of the chairmen of President Barack Obama’s debt commission. Just 38 House members voted for that proposal, modeled after a deficit plan written by former Republican Senator Alan Simpson of Wyoming and President Bill Clinton’s former Chief of Staff Erskine Bowles.
The Bowles-Simpson plan sought to cut projected budget deficits by $4 trillion over a decade through a combination of tax increases and cuts to entitlement programs.
“Americans are screaming for us to take off our red jerseys on this side, to take off the blue jerseys on that side, and put on the red, white and blue jerseys of the United States of America,” said Representative Steve LaTourette, an Ohio Republican.
That vote was a setback for supporters of the Bowles-Simpson approach who were divided over whether to even ask for a vote. Some expressed concern that a poor showing would make it harder to resurrect the plan later.
“Doesn’t help,” Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said of the House vote on the defeated proposal. “That’s why I thought it was unwise to advance it at this point.”
Asked why lawmakers haven’t supported the Bowles-Simpson plan, Bowles said: “It’s politically painful.” In an interview on the “Charlie Rose” show broadcast on PBS and Bloomberg Television, Bowles said, “As long as people are worshiping the great god of re-election, then we’re going to have a hard time getting to the promised land.”
Republicans demanded a vote on Obama’s February budget request, which was unanimously defeated. A third budget plan, by a faction of conservative Republicans who said their party’s plan didn’t go far enough to cut spending, was rejected 136-285.
The centerpiece of the debate was the Ryan plan, which would lower the deficit to as little as $166 billion in coming years, primarily though cuts to scores of social-welfare programs.
Cuts to Medicaid
Medicaid, the health-care program for 50 million low-income Americans, would be cut by one-third. Pell college tuition grants, food stamps, welfare, farm subsidies and the operating budgets of most federal agencies all would face reductions.
The plan would also cut taxes by $2 trillion, with the top rate falling to 25 percent from 35 percent. It would compress the number of individual income-tax brackets to two from six, with the bottom rate set at 10 percent.
The plan would threaten many tax breaks, such as the one letting homeowners write off their mortgage interest, and would use that revenue to replace what would be lost through the rate cuts.
The plan’s biggest change would be to overhaul Medicare. It would offer seniors, starting in 2023, subsidies to buy private insurance, with the premise that competition would drive down health-care costs.
Concept Won’t Work
Democrats maintain that the concept won’t work, saying the subsidies won’t keep pace with health-care costs, leaving seniors to either shoulder bigger bills or forgo care. It would send “our seniors to swim with the sharks in the insurance market, hope that the insurance companies grant them coverage for what they may need,” said Representative Tim Ryan, an Ohio Democrat.
Representative Jeff Flake, an Arizona Republican, backed Paul Ryan’s proposal.
“This plan doesn’t end the Medicare guarantee; arithmetic does,” Flake said. “Unless we change something, unless we put it on solvent footing, the guarantee is gone. Medicare will be bankrupt under the current trajectory.”
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